PHA houses being fliped

[love to travel]

All the houses that were sold on the 3000 blk Cambridge st at PHA auction are being fliped . Sell price $135K . Not cool these houses should have to be fixed . The was the whole idea of selling them

[DocAwesome]

I guess the only provision in the sale I've read about is that they need to be fixed up in 5 years or they revert. I know it probably isn't even practically enforceable, however if they trigger this clause do the buyers get their money back? I would personally hope not as it creates some inequities with the whole process.
I doubt there was anything in the wording as strong as saying it couldn't be flipped without improvement, however regardless if they do flip I'm wondering if there becomes a lein of sort for the new buyers stating that they need to fix the place up in 5-x years otherwise it goes away. I would imagine this would drive the resale value down to an educated buyer on the secondary market.

[raider.adam]

I'm not sure what the problem is. They have to be fixed within five years. The new owner would have to abide by that clause as well. Does it really matter if it was the person who won the auction or someone they sold it to?

[eldondre]

I'm not sure what the problem is. They have to be fixed within five years. The new owner would have to abide by that clause as well. Does it really matter if it was the person who won the auction or someone they sold it to?

if the properties can be flipped for a profit, it means the auction didn't maximize the value of the properties being sold...so in a way flippers would be helping PHA evaluate its auction process. from a development standpoint, who cares so long as it's developed?

[ArcticSplash]

A lot of people continue to complain that it's illogical to sell PHA property because it may go to a speculator who will squat on it.


But here is the deal---if you create a never-ending vortex of Sheriff's Sales that suck in blighted properties through the auction system and you use Act 90 to attach the personal assets of owners who fail to pay their fines and fees (to get past LLC/LLP shells some houses are deeded to), you eliminate that problem.


If you narrow the time horizon from when you pick up a Sheriff's Sale property, to when the City takes the property away from you to 2 years, then it doesn't make much economic sense to play the Real Estate Squat game (ala Sam Rappaport). The City can write up L&I violations, which won't get paid, use Act 90, which the owner won't pay, then the property is taken away again in Sheriff's Sale. This eliminates any profit off of playing the Real Estate casino of holding on to a property and not maintaining it or paying any taxes on it, in hopes that someday a windfall may happen if someone wants to buy it.


Each time the City makes money on the Real Estate Transfer Tax when the property is again sold at auction. That's better than the City earning nothing off these properties. And hey, if a responsible owner buys them, then it will continue to generate revenue for Philadelphia.

[raider.adam]

if the properties can be flipped for a profit, it means the auction didn't maximize the value of the properties being sold...so in a way flippers would be helping PHA evaluate its auction process. from a development standpoint, who cares so long as it's developed?

Well, I would premise that an auction doesn't necessarily maximize the value since you are dealing with buyers that take the time to go to an auction and have a certain amount of cash on hand. What the auction does is minimize the overhead and time involved with selling.

If they wanted to maximize value, they would list them with realtors and estimated starting price levels, but then you are talking about a process that could take anywhere from a month to years to sell it all off.

Sure they probably don't get top dollar with the auctions (especially since you don't get to walk through the property to accurately calculate rehab costs), but the whole process gets finished in a single day.

[eldondre]

Well, I would premise that an auction doesn't necessarily maximize the value since you are dealing with buyers that take the time to go to an auction and have a certain amount of cash on hand. What the auction does is minimize the overhead and time involved with selling.
If they wanted to maximize value, they would list them with realtors and estimated starting price levels, but then you are talking about a process that could take anywhere from a month to years to sell it all off.
Sure they probably don't get top dollar with the auctions (especially since you don't get to walk through the property to accurately calculate rehab costs), but the whole process gets finished in a single day.

not necessarily, but I'd guess that different approaches to the auction would yield different results. interestingly, pha did have two very different auctions.

[ArcticSplash]

The other answer to "what if a property doesn't sell at auction" is:

Looking at the 400 PHA properties that are in the hood, and the appetite for acquiring them, it's pretty clear that there's a market even in this bad economy. Even if a property doesn't get a single bid, the City should have a standing auction offer out for the property after the initial sale is over with, which is not that dissimilar from eBay except that it continues indefinitely until someone wants to pick it up and purchase it.

The new Land Bank proposal has a similar concept, but the Land Bank proposals that I've heard so far also include provisions where community groups can grab quite a number of properties (maybe they get preferential treatment vs. a residential or commercial property buyer, who knows... it's still up in the air). If anything, the last thing I want to see is civic organizations turning into defacto property holding companies.


The original Spring Garden Civic Association was doing this crap under Ruth Arnao, who was convicted in Federal Court. She was using her 1-person civic to run what amounts to a property trust that benefited her and no-one else.

[raider.adam]

The other answer to "what if a property doesn't sell at auction" is:

Looking at the 400 PHA properties that are in the hood, and the appetite for acquiring them, it's pretty clear that there's a market even in this bad economy. Even if a property doesn't get a single bid, the City should have a standing auction offer out for the property after the initial sale is over with, which is not that dissimilar from eBay except that it continues indefinitely until someone wants to pick it up and purchase it.

The new Land Bank proposal has a similar concept, but the Land Bank proposals that I've heard so far also include provisions where community groups can grab quite a number of properties (maybe they get preferential treatment vs. a residential or commercial property buyer, who knows... it's still up in the air). If anything, the last thing I want to see is civic organizations turning into defacto property holding companies.


The original Spring Garden Civic Association was doing this crap under Ruth Arnao, who was convicted in Federal Court. She was using her 1-person civic to run what amounts to a property trust that benefited her and no-one else.

My recommendation was as follows:

Send properties to auction. the ones that don't make auction get listed online with their assessed value. Anyone can buy them at that price. After a certain period of time (1 year? 2?) they get sent back to auction.

Rinse, repeat.

KISS method.

The landbank proposals out there are atrocious.

[ACretin]

Yeah landbanks are a real bad idea. In terms of the resale of PHA properties, it highlights again why you get more money for your property if you sell on the MLS. Auctions, or other bidding processes like those of the RDA, do not get the best price for the property. The PHA and RDA are squandering taxpayer dollars by selling their properties at below market rate prices, often to politically connected buyers. Pay to play. The MLS has a lot of virtues, and I don't see why our City government agencies are unable to realize it's benefits. Oh, but then again it's not their money they are wasting. Or their communities they are destroying.

[StrangeTanks]

I think the OP is being very deceptive on this thread.

The properties havn't been flipped. They are on the market for 135k. That doesn't mean anyone will buy them. I would do the exact same thing as the investor that bought these properties. If I can sell them and make a quick profit great, if not I'll renovate and sell/rent them later.

First of all coming up with a pile of cash to buy them is tough, then you have the risk your taking acquiring the properties. The guy that bought them from PHA didn't have any special advantage over anyone else. I have no problem with someone else making a profit from their risk.

[billy ross]

I think the OP is being very deceptive on this thread.

The properties havn't been flipped. They are on the market for 135k. That doesn't mean anyone will buy them. I would do the exact same thing as the investor that bought these properties. If I can sell them and make a quick profit great, if not I'll renovate and sell/rent them later.

First of all coming up with a pile of cash to buy them is tough, then you have the risk your taking acquiring the properties. The guy that bought them from PHA didn't have any special advantage over anyone else. I have no problem with someone else making a profit from their risk.

Have they gone to settlement yet? If not then he is trying to sell the contracts. Are they transferable?

[raider.adam]

Have they gone to settlement yet? If not then he is trying to sell the contracts. Are they transferable?

Settlement is 45-60 days after the auction. So I am sure they are just getting a jump on listing them.

[billy ross]

Settlement is 45-60 days after the auction. So I am sure they are just getting a jump on listing them.

Not necessarily. The goal is to sell the contract rather than the house. That way you never take possession of the house and you never use more than your down money. Plus you pay no transfer tax. If you go to settlement you've got to pay to record the deed, you've got to pay transfer tax, you've got to pay for title insurance, you've got to come up with the balance of the purchase price, etc. All of those can be avoided by selling the contract, if the contract is transferable. These guys that go to auctions try to sell the contracts all of the time - I've bought a few houses by buying the agreement of sale then going to settlement myself. It screws up the amount I paid for it when the deed is recorded, though, since I go to settlement at their price but I've got to pay them their premium, which doesn't appear in the records.

[raider.adam]

Not necessarily. The goal is to sell the contract rather than the house. That way you never take possession of the house and you never use more than your down money. Plus you pay no transfer tax. If you go to settlement you've got to pay to record the deed, you've got to pay transfer tax, you've got to pay for title insurance, you've got to come up with the balance of the purchase price, etc. All of those can be avoided by selling the contract, if the contract is transferable. These guys that go to auctions try to sell the contracts all of the time - I've bought a few houses by buying the agreement of sale then going to settlement myself. It screws up the amount I paid for it when the deed is recorded, though, since I go to settlement at their price but I've got to pay them their premium, which doesn't appear in the records.

The fees are already included. 10% is added to the bid price. At the auction, they processed the paperwork for the deed in the name you give them. I would be curious if you would be able to show up and ask for it all to be redone in a different name.

This auction was different from what I recall of the City auction.

[ArcticSplash]

Yeah landbanks are a real bad idea. In terms of the resale of PHA properties, it highlights again why you get more money for your property if you sell on the MLS. Auctions, or other bidding processes like those of the RDA, do not get the best price for the property. The PHA and RDA are squandering taxpayer dollars by selling their properties at below market rate prices, often to politically connected buyers. Pay to play. The MLS has a lot of virtues, and I don't see why our City government agencies are unable to realize it's benefits. Oh, but then again it's not their money they are wasting. Or their communities they are destroying.

Meh. PHA itself destroys communities anywhere it builds a project (or typically, the community had already gone to the crapper a while before PHA appeared).

Property transfers into the RDA are just a realization of the obvious: people gave up on the neighborhood because the City doesn't carry out the basic functions of property/zoning/land-use management anywhere near remotely close to the level that responsible municipalities go about doing it.

[ArcticSplash]

Not necessarily. The goal is to sell the contract rather than the house. That way you never take possession of the house and you never use more than your down money. Plus you pay no transfer tax. If you go to settlement you've got to pay to record the deed, you've got to pay transfer tax, you've got to pay for title insurance, you've got to come up with the balance of the purchase price, etc. All of those can be avoided by selling the contract, if the contract is transferable. These guys that go to auctions try to sell the contracts all of the time - I've bought a few houses by buying the agreement of sale then going to settlement myself. It screws up the amount I paid for it when the deed is recorded, though, since I go to settlement at their price but I've got to pay them their premium, which doesn't appear in the records.

Correct me if I am wrong, but there is no requirement at a Sheriff's Auction for the deed transfer to include title insurance along with it. It's a cash deal between you and the PHA which is akin to a "kitchen-table settlement", similar to how the side yard program doesn't require title insurance either (but it's suicide to NOT get it... you don't know WHAT problems that property has in the closet when you acquire the title, particularly if was a deceased that owned it last).

Are PHA auctions specifically requiring that the buyers go get title insurance and a title search on PHA's property? What would be the motive for that, other than PHA isn't all that certain that it is the true owner with clear title over all the properties in its basket?

[raider.adam]

Correct me if I am wrong, but there is no requirement at a Sheriff's Auction for the deed transfer to include title insurance along with it. It's a cash deal between you and the PHA which is akin to a "kitchen-table settlement", similar to how the side yard program doesn't require title insurance either (but it's suicide to NOT get it... you don't know WHAT problems that property has in the closet when you acquire the title, particularly if was a deceased that owned it last).

Are PHA auctions specifically requiring that the buyers go get title insurance and a title search on PHA's property? What would be the motive for that, other than PHA isn't all that certain that it is the true owner with clear title over all the properties in its basket?

Sheriff sales and the PHA auction don't require title insurance. It is on you to do it.

[StrangeTanks]

Correct me if I am wrong, but there is no requirement at a Sheriff's Auction for the deed transfer to include title insurance along with it. It's a cash deal between you and the PHA which is akin to a "kitchen-table settlement", similar to how the side yard program doesn't require title insurance either (but it's suicide to NOT get it... you don't know WHAT problems that property has in the closet when you acquire the title, particularly if was a deceased that owned it last).

Are PHA auctions specifically requiring that the buyers go get title insurance and a title search on PHA's property? What would be the motive for that, other than PHA isn't all that certain that it is the true owner with clear title over all the properties in its basket?

I'm sure PHA says they guarantee a clean title as does the sheriff's office. Essentially, title insurance is optional on any real estate transaction. I don't usually buy title insurance when I buy at sheriff's sale, but I do pay to have a title search done.

Usually its not to prove ownership, its to make sure that there aren't any goofy liens left against the property.

[Jay from Philly]

All the houses that were sold on the 3000 blk Cambridge st at PHA auction are being fliped . Sell price $135K . Not cool these houses should have to be fixed . The was the whole idea of selling them

I would still say this is better than PHA holding them, i.e. subsidized blight.